Credit Growth To Tick Up In The Near Term
BMI View: We believe that Trinidad & Tobago (T&T) 's banking sector will continue to see an uptick in credit growth this year, driven by low interest rates and an increase in business and consumer confidence. Moreover , with new financial sector regulations and a healthy loan-to-deposit ratio, we expect T&T's banking sector to remain among the most stable in the region going forward .
After a contract ion in loans in 2010, and subdued credit growth for much of 2011 and 2012, lending by Trinidadian commercial banks has seen an uptick in Q113 , with total loans up 5.1 % year-on-year (y-o-y) . We expect this trend will be sustained through 2013 and early 2014 for several reasons . First, we expect record low interest rates will continue to feed through the financial system, leading to increased lending. Indeed, after a round of cuts to the repo rate through 2012, we believe that the Central Bank of Trinidad & Tobago (CBTT) will maintain the benchmark policy rate at 2.75% through the end of 2013 given relatively low inflationary pressures ( see 'Accommodative Stance Will Continue In The Near Term,' May 28) .
Second, we believe that a return to growth for the energy sector, which we forecast will drive real GDP growth of 2.5% in 2013 and 3.0% in 2014, from 1.2% in 2012, will improve confidence among businesses and consumers, driving demand for credit. Moreover, the growing deposit base that commercial banks have seen in recent quarters on the back of stronger revenues from T&T's energy sector will support an organic increase in lending as the economy picks up steam. Indeed, total deposits at commercial banks have averaged 11.0% y-o-y growth over the past 12 months, reaching TTD92,972.4mn in March.
|Signs Of A Recovery|
|T&T - Commercial Banking System Credit (LHS) & Loans, % chg y-o-y (RHS)|